Confectionery makers knock-out the sugar for healthier bottomlines. Mohini Bhatnagar reports
The Rs1,600 crore confectionery market in India is expanding like never before as the local subsidiaries of global confectionery majors Perfetti, Lotte, Wrigley's and Cadbury are swinging into action with new strategies backed by investment to grab a larger slice of the confectionery market.
Perfetti Van Melle, which entered India in 1994, is planning to expand its manufacturing capacities and will invest between Rs20 crore and Rs30 crore this fiscal and Rs150 crore Rs200 crore over the next two years to augment capacity at its plants in Haryana and Chennai. The company is also examining options to expand its product portfolio in India.
Perfetti's range of chewing gums and candy brands worldwide include Alpenliebe, Air Heads, Bloop, Brooklyn, Chlor-mint, Center Fresh, Daygum, Frisk, Fruittella, Golia, Happydent, Mega Big Babol, Mentos, Morositas, Tabu, Vigorsol and Vivident.
Perfetti has introduced Alpenliebe, Mentos Chlor-Mint, Fruitella, Cofitos and Chocotella candy brands while in chewing gums it has launched Big Babol and Center Fresh (Center Shock) chewing gums in India. Brooklyn was introduced for a brief while in 1996 and was withdrawn. Earlier this year, Perfetti entered the digestives market with Chatarpatar.
Perfetti has so far invested between Rs500 and Rs600 crore in India since 1994. Perfetti's turnover is expected to cross Rs450 crore this year from Rs400 crore last year.
Apart from augmenting its manufacturing capacity Perfetti is also simultaneously expanding its distribution network to 4,000 from 3,500 at present in the next 12 months.
The friendly neighbourhood panwalla now plays a key role in the growth of company's distribution network. Perfetti's products are stocked across an estimated 10 lakh (one million) outlets across the country of which 2.5 lakh are pan shops.
Korean confectionery company Lotte India, which acquired a 60.39 per cent in Parry's Confectionery from the Murugappa group in January 2004 for Rs64.47 crore, and later another 20 per cent through an open offer, is looking to diversify into product categories like chocolates, biscuits, snack foods and ice creams.
Lotte, counted among the five largest Korea Cheabols has a huge portfolio of brands including beverages, bottled water, flavoured water, fruit juices, chocolates, biscuits and ice creams. Lotte will use the Parrys brand for five years and is paying EID Parry a royalty of Rs5 lakh a year.
Lotte is studying the domestic market and plans to roll out its brands over a two to three year timeframe. The company recently rolled out Butter Scotch, a new sugar boiled candy in butterscotch flavour and is planning to relaunch the blockbuster brand Coffy Bite very soon.
Cadbury India, the venerable (the worms controversy apart) chocolates and confectioneries major in India is also eyeing the chewing gum market and is looking at the possibility of bringing in some of the brands from Warner Lambert's international portfolio.
Cadbury's does not share Perfetti's enthusiasm for the Indian market. According to company officials, "The gums market is not doing well in India. We are evaluating if there is a market for gums in India and whether it is going to be worth our while," says Bharat Puri, managing director, Cadbury India.
For Cadbury's the attraction in the confectionery market lies in its faster growth over the chocolates market (still recovering from worms). Earlier Cadbury's relaunched Halls, one of Warner Lambert's brands to push sales. The company says Halls has begun doing well after the relaunch.
Last year Cadbury India's foreign parent acquired Pfizer's interests in the confectionery business for $4.2 billion. That included the Warner-Lambert product portfolio, known best for Halls, Clorets and Chiclets. The acquisition is now poised to become a growth area for Cadbury India, whose confectionery brands include Eclairs.
Strangely enough, Cadbury's is not using its existing chocolate network for retailing its confectionery and has set up an entirely new network.
Apart from repackaging and relaunching candy brand Halls Cadbury's does not seem to be doing anything about Warner Lambert's other brands such as Chiclets, the oldest chewing gum brand in India and Clorets, which sells with a small franchise without any advertising support.
The global leader in the chewing gum market Wrigley's is also aggressively expanding its presence in India. In June this year Wm Wrigley acquired the worldwide Joyco gum and confectionery businesses from Agrolimen, a privately-held Spanish food conglomerate for €215 million. This cash transaction was for Joyco's operations in China, France, India, Italy, Poland and Spain along with Cafosa, its chewing and bubble-gum base business.
The deal gave Wrigley's a dominant position in confectionery lollipops and bubble gums in India since Joyco was a leader in the Indian confectionery business and brought the Pim Pom, Boomer and Solano brands into Wrigley's portfolio.
The sugar free way
Interestingly apart from Cadbury's the three confectionery giants, Perfetti, Lotte and Wrigley's, are focusing on bubble gums and chewing gum even though the chewing gum market is one-fourth the size of the total confectionery market in India. However, the action being seen in this segment may soon lead to faster growth as more and more new products are being launched.
In the last couple of months action has been revolving around chewing gums and that too the sugar-free variety.
In the last decade or so sugar-free chewing gum has become preferred over sugary chewing gums in the obesity afflicted west.
Sugar-free chewing gum recently received a boost when a study revealed that the natural flavours found in Big Red, a chewing gum brand manufactured by Wrigley's can beat bacteria that cause bad breath, which means it is beneficial to teeth as well.
Christine Wu, professor of periodontics at the University of Chicago and lead author of the study reportedly said chewing gum has significant impact on oral hygiene as it contained anti-microbial agents such as cinnamic aldehyde plant oil used in flavouring chewing gums.
The study naturally boosted sales of US-based Wrigley's products.
In India, the prevention of food adulteration rules have also done away restrictions against marketing of "sugar free" products in the confectionery category with the result that confectionery makers have jumped on the health benefits aspects of sugar free chewing gum.
US based Wrigley, the world's leading chewing gum maker, recently launched Orbit, a sugar-free gum available in a flow pack of four for Rs5. The company is also seeking a patent in the US market to come up with a Viagra gum.
While Wrigley's is tom tomming the benefits of cinnamic aldehyde Perfetti of Italy and Lotte of Korea are talking of the benefits of Xylitol.
Perfetti has rolled out its Happydent Protex sugar-free chewing gum and claims it prevents tooth decay. The company has packaged six gums in a blister pack (at Rs5), giving it the look and feel of a medicine. It also has a mono pack variant priced at Re1. Happydent is being sold as a good substitute for toothpaste after every meal, as it is not possible to brush one's teeth always after eating.
Sameer Suneja, head of marketing, Perfetti says chewing gums are increasingly being seen as a mode of drug delivery in the west. In many European countries, dentists prescribe sugar-free chewing gums to improve the health of teeth he said. Suneja adds that in western countries, antacid chewing gums are also gaining popularity.
Perfetti maintains that the Xylitol content in Happydent the gum prevents dental caries. The company is ready to spend an estimated Rs2 crore in the next two months to get a portion of the sugar free gum market.
Lotte also plans to begin manufacturing and marketing Lotte Xylitol a global $100-million sugar free chewing gum brand, and is installing an imported line at its factory in Nellikuppam in Tamil Nadu to manufacture chewing gums at an investment of around Rs4 crore and another Rs6-7 crore in brand building.
Cadbury's India, while adopting a more cautious approach towards chewing gum launches, is looking at launching Warner Lambert's sugarless gum brands Dentyne Ice and Trident White, known for their functional benefits world-wide. However it feels that the brands may not work in India due to their steep prices.
For confectionery makers in India it doesn't seem to matter that sugar free chewing gum is a minuscule market simply because a new segment has been created which can only grow.